National Grid, N.Y. are $200 million apart

National Grid is once again going to have a tough time getting the rate increase it says it needs from upstate customers next year unless it can convince the state Public Service Commission otherwise.

The U.K.-based gas and electric utility has a $200 million chasm to cross, according to new regulatory filings in the case.

And that won’t be easy after the last time that National Grid came to the PSC asking for more money from customers but had millions of dollars in accounting errors.

And this time around, auditors at the Department of Public Service, the administrative arm of the five-member PSC, have found other examples of incomplete or incorrect numbers.

“It is completely unacceptable for a company the size of National Grid to file such an incomplete and inadequate rate case,” audit staff at the PSC said.

Back in April, National Grid filed with the PSC asking for a $131 million electric rate increase and a gas rate increase of $40 million for its upstate New York customers.

The way that utility bills work, the increases would only result in the average homeowner’s monthly bill going up 14 cents.

But the accounting and finance experts at the Department of Public Service say National Grid’s increases are not justified when you take a closer look.

They propose decreases instead to National Grid’s rates, and now the two sides are roughly $198 million apart.

Utilities base at least part of their rate increase requests on a year’s worth of expenses called the “historic test year” that it says show the true cost of doing business in the future. DPS staff look over the numbers and often ask for more details.

DPS staff will suggest removing costs from the rate request if they have not received sufficient justification, although it is the PSC commissioners who ultimately decide how much the utility can charge.

Back in 2010, National Grid asked for a $370 million electric rate hike, but after DPS staff uncovered sloppy and somewhat embarrassing accounting backing up the request, National Grid only ended up getting roughly $113 million.

After that, National Grid vowed to fix its accounting problems and orchestrated a massive restructuring of its white-collar workforce.

Although DPS staff said that overall the rate filing was pretty good, it said it was very upset by some glaring errors and issues with Ernst & Young.

National Grid says that in order to avoid the accounting issues from the 2010 case, it hired the accounting firm Ernst & Young to go over its numbers before they were submitted to the PSC this time around.

Based on Ernst & Young’s analysis, National Grid ended up adding $2.4 million to its rate request filing.

But once DPS began examining how Ernst & Young did its study, it found it lacking, claiming that the accounting firm overstated how many invoices and other costs it actually scrutinized.

Ernst & Young “has not shown that the study is reasonably representative, unbiased or statistically valid,” DPS staff said.

DPS also went on to say that mistakes that it found in the Ernst & Young study “raises serious concerns about the validity and accuracy of the limited work (Ernst & Young) was supposed to have done.”

Because of that, DPS staff says the $2.4 million should be tossed.

DPS was also critical of how National Grid accounted for “expat” expenses, which is the cost of sending workers from the U.K. to the U.S. for short-term assignments. The issue of lavish expat costs caused a stir in the 2010 case.

DPS was a little upset this time around with how National Grid came up with $1.6 million in expat costs , noting the number was derived from when there was more expats being used.

For instance there were 22 expats in 2011, but by the end of next year, that number is going to be down closer to nearly zero, part of the company’s cost-cutting reorganization. DPS didn’t realize the issue until it started asking questions.

“In the future, the company must do a better job of reviewing and scrubbing the historic test year in preparation of a major rate filing,” DPS said.

Larry Rulison

2 Responses

National Grid had 24/7 customer service but cut that to weekdays with limited hours and some hours on Saturday. Depending on ones work hours this is very inconvenient.
The staff can be arrogant and rude. You can get the run around.
They don’t deserve a rate hike, we pay enough. Other areas have much lower rates than upstate NY.